March 3, 2017

Site Feasibility for Developments

site feasibility

Site Feasibility - How the numbers work:

Property development is a means of buying new property at wholesale prices. Buying wholesale means you're paying for the materials and labour in sourcing the site and building on it. This is opposed to paying retail, which includes the developer's profit margins, GST payable on new homes that the seller pays (& would pass on to the buyer), selling and marketing costs. The site feasibility is viable when the value of the end products is more than all the costs to buy the land and build.

To give you an idea of the rough (but typical) wholesale costs involved, here's a case study of 2 first home buyers and a downsizer, joining forces to buy a three unit development site to subdivide and build together for wholesale prices.

Case Study:

Buyer 1 - John and Jenny are newly married, young professionals with no kids, currently renting in Doubleview WA. They are first home buyers looking for a new home and wish to stay in the area close to Doubleview because their parents live in the suburbs Karrinyup and Trigg. They want to spend between $500,000 - $600,000.
Buyer 2 - Kelly is a single, careerĀ girl looking for a place of her own having relocated to Perth from Melbourne for over 3 years now. It's time for her to get out of renting with her friend and buy her own first home, and potentially rent a room out to her friend. Kelly would love a brand new villa in good location near a train station and shopping centre, and security is high on her priority. Her budget is $480,000 - $530,000
Buyer 3 - Dave and Marg are downsizers looking at retirement homes options, but have decided that a new, smaller home in their current neighbourhood of Innaloo WA may be a good option. Ideally they would like a house with it's own street front and need a minimum of a 1 car garage. They have a budget of $600,000 - $650,000.

In this case study, Catalyst Developments has matched these 3 buyers:

  • John and Jenny happy with the rear villa with double garage and more parking on driveway for guests
  • Kelly being interested in the more secure and slightly lower value middle villa
  • Dave and Marg wanting the street front villa

Here are some numbers for their Innaloo WA site purchase and build costs (note that each property and building design will be different so specific costs and site feasibility will vary project by project):


Catalyst Developments' buyer matching service: $99 each (*limited time offer only*)

Purchase price of land: $720,000

Government Duties: $28,224

Due-diligence, consultants and settlement costs: $28,822


Demolition: $18,000

Design, approvals and subdivision costs: $46,600

Retaining walls: $30,000


3x Villas: $660,000


Rates, taxes and insurance: $5,000

Interest costs: $62,103


Conveyancing fees: $2,400


TOTAL COSTS = $1,601,149

If the values of each dwelling were the same, you could divide the above by 3 people - but in this case study, the end values of each dwellings were as follows:

  • $570,000 for the front villa (33.33%)
  • $560,000 for the middle villa (32.75%)
  • $580,000 for the rear villa (33.92%)

So using the same percentages for total costs, here's what each villa cost:

  • Front villa total cost: $533,716
  • Middle villa total cost: $524,353
  • Rear villa total cost: $543,080

All parties in this buying group had not only met their budget constraints, but ended up with a brand new, customized home for under the price of where market values were. They could also be confident that the property and builder was well-researched by professional advisors working for them, and each buyer's finances were pre-qualified before starting the venture together.